It’s Not Just COVID: Understanding the Drop in U.S. Patent Application Filings

In 2020, the percentage of pending patent applications that were abandoned rose to 62% over a previous four-year drop of 49%-41%. The implication was that patent applicants were cutting back on expenses in response to the adverse economic impact of the coronavirus pandemic.

At the same time, there was a 2% drop in the number of U.S. patent applications filed in 2020 and a minor drop of 0.4% in U.S. patent applications filed in 2021, according to preliminary data.

The following is a graph of U.S. patent applications filed from 2000 to 2021:

Focusing narrowly on application filings from 2019 to 2021 makes it tempting and reasonable to interpret the decline in application filings as being attributable primarily to the coronavirus pandemic’s impact on the economy.

However, looking at the graph as a whole, it can be seen that the number of U.S. patent applications that were filed increased year after year from 2000 until 2016, except for a one-year drop in 2009 caused by the global financial crisis.

Digging Into the Data

From 2016 on, the number of patent applications generally leveled out, hovering around 650,000 except for a 4% increase in 2019 that can be attributed to a July 31, 2019, Federal Notice that the United States Patent and Trademark Office (USPTO) intended to raise patent fees by 5-10% and was requesting public comments on the proposed fee increases that were to take effect in FY2020. In 2019, patent applicants rushed to get applications filed before the fee increases were imposed.

In 2018, before the coronavirus pandemic, patent application filings in the U.S. dropped by 1.6%.  At the same time, worldwide patent application filings grew by more than 5%.

During the coronavirus pandemic U.S. patent application filings dropped steadily after 2019. In contrast, worldwide patent application filings increased by 1.6% in 2020.

All things being equal, one would expect that the coronavirus pandemic would have the same or similar effect on patent application filings in all countries and would not cause a decrease in U.S. patent application filings while causing an increase in worldwide patent application filings.

While the coronavirus pandemic initially caused adjustments in budgeting, workforce and workplace attendance, it seems that something before the pandemic caused a decrease in the number of patent applications that were filed in the U.S. back in 2017, while worldwide patent applications increased by 5.8% in the same year.

In 2018, the U.S. Patent System fell from 10^th to 12^th place in the U.S. Chamber of Commerce’s annual Global IP Index as the result of a patent climate that the Chamber characterized as causing “considerable uncertainty for innovators.” This drop from 2017 to 2018 caused the United States to join a handful of other countries that are not thought of as being particularly intellectual property friendly.

To justify the drop in patent ranking given to the U.S., the Chamber cited Supreme Court decisions on patent eligible subject matter (Mayo, Myriad and Alice) and recent interpretations of those cases and examination guidance provided to examiners in the USPTO. Further, the Chamber noted concern over how easy it has become to challenge patents in post-grant proceedings at the Patent Trial and Appeal Board (PTAB).

Impact of Post Grant Proceedings

In 2012, the USPTO instituted procedures for challenging the validity of patents before the PTAB, including Inter Partes Review (IPR) and Post Grant Review (PGR). These procedures were intended to be time-saving and substantially less costly than litigating patent validity in the Federal Court System.

While the number of IPR petitions filed in 2020 increased by 2.5% and fell by 8% in 2021, the number of PGR petitions filed in 2020 increased 33% and 45% in 2021. Outside the PTAB on average, there are between 5,000 and 6,000 patent case filings in the United States per year, with $4.67 billion in patent damages being awarded in 2020.

Worldwide Trends

The number of foreign applicants filing applications in the United States steadily increased from 2014 to 2019. Over the same period, the percentage of U.S. patent applications filed by foreign applicants increased from 50 to 55%, surpassing the number of U.S. applicants. As a result, not only did the number of patent applications filed in the United States drop at the beginning of the coronavirus pandemic, in addition, the percentage of applications filed by U.S. applicants dropped.

Interestingly enough, the United States retained its second-place ranking in overall worldwide patent application filings from 2017 – 2020.

While the coronavirus pandemic certainly forced businesses to make adjustments, factors other than the pandemic seem to be responsible for the drop in the number of patent applications filed by U.S. applicants in the United States prior to and during the pandemic, keeping in mind that U.S. applicants managed to file enough worldwide patent applications to maintain their second-place ranking.

 

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